Underwriting is an extensive form of research done by insurance companies to assess the degree of risk every application brings. The result of underwriting helps companies select the best policy that they can offer to the applicant or entity. Underwriting is necessary to safeguard the interest of the insurance company to retain profitability even in case of claim submission.
Insurance companies still using legacy technology to carry out underwriting know how much time and resource they need to invest. Some can take a long as 30 days to select a suitable policy for an application. Moreover, the process of research might be inadequate and manipulated. Human errors can lead to mispriced premiums causing major losses for the company.
Why AI is necessary for underwriting
To quicken the underwriting process and remove the possibility of flaws, AI-driven solutions are much needed for underwriting. Insurers planning to adopt these solutions will get a competitive advantage compared to others.
Here are some reasons why the process of underwriting needs to transform:
1. Reduced risk
AI offer a larger database for underwriters to analyse and evaluate. Data analytics provide deeper visibility into exploring customers’ profiles and assessing possible risks. Algorithms help tailor-make premiums that match their profile. Thus, when an insurer presents a customised package, they are surer of their profitability.
2. Better customer experience
Customers require real-time services that give them solutions within a short period. Digital touchpoints need to be fast, quick, and efficient as these aspects facilitate customer retention. It is increasingly important to shorten the time taken to process underwriting. AI solutions can give accurate and instant results altering month-long work. Thus, there are more chances to offer customers quicker services and increase chances of retention.
3. Higher profitability
The insurance industry is service-oriented, but automation can change several tasks that people still manually accomplish. AI-based automation processes can transform the way companies process claims, incorporate data, offer digital touchpoints, and more. It not only streamlines and makes the process efficient but also reduces operational costs. Thus, the probability of increasing profits goes higher.
Final thoughts
Underwriting is one of the most important tasks that shape the backbone of an insurance company. As insurance companies are gradually shifting to digitisation, their central focus should be on underwriting. It will exhibit progressively the need to automate other activities to yield maximum productivity and profitability.